Consumers may be starting to spend enough to stop the economic slide that’s dominated the year, MasterCard’s president of U.S. markets said Thursday.
Chris McWilton said data to be released in the next week shows the decline in spending that has hit the retail and credit industries hard may be abating.
“It’s not positive yet but certainly the trajectory, the free fall that we saw in January and February of this year has abated,” McWilton said in a conference call with analysts.
He said consumers are spending money on essentials including groceries and prescription drugs, and purchases of fast-food meals. They are not spending money on furniture, appliances and luxury retail items.
“I think this all makes sense. The U.S. consumer is just trying to get through this difficult period and get to the other side, get the unemployment rates down, get some confidence back into the system,” he said.
Banks that offer credit cards continue to see increasing rates of chargeoffs—debt that is written of as lost after six months of non-payment, McWilton said.
He said the level of chargeoffs increases as unemployment climbs. Since unemployment is expected to climb slightly higher before tapering off next year, the losses for MasterCard’s bank customers will likely continue.
Banks are dealing with the trend by spending less money to add new accounts and efforts to attract new business.
Also on Thursday, Fitch Ratings analysts reported that the rate of delinquent credit-card payments slowed in May, ending a four-month trend of setting new records.
Even though consumers were doing a better job of paying their bills, delinquency rates remained elevated at near record levels and nearly 40% above year-earlier rates.
